Luckin Edges Closer to Customers with Vending Machine Strategy
The digital and technical attributes of Luckin Coffee have assisted its fast expansion as well as dealing with its trials as a new business. Will Luckin’s vending machines help the company to cement more market share and gain profit in the future?
As the fastest-listed Chinese company in history, Luckin Coffee (Nasdaq: LK) has never slowed down in expansion, aiming to be one of the most influential coffee brands. And it has made another move.
On January 8, 2020, Luckin Coffee announced its 'unmanned retail strategy (automated and smart)' at a press conference with the launch of its 'luckin coffee EXPRESS' smart unmanned coffee machine and 'luckin pop MINI' smart vending machine. It also disclosed the number of self-operated stores that reached 4,507 by the end of 2019. Moreover, the cumulative customer transaction figures grew to over 40 million as of December 31, 2019.
"Luckin coffee EXPRESS is so far the most luxurious and expensive smart coffee machine in China," said Luckin Coffee Qian Zhiya (钱治亚) at the conference. Featuring Swiss Schaerer coffee machines, IIAC Gold Award coffee beans and New Zealand Anchor milk, luckin coffee EXPRESS provides freshly brewed drinks with the same quality and taste as in any Luckin stores, she emphasized.
According to the staff of Luckin, a cup of coffee from the machine takes about 90s to 100s to be made and it supports cross-machine ordering, meaning customers can order from one machine and take the coffee from another one. If the coffee is not taken within two hours, it will be refunded automatically.
The coffee sold from the machine is consistent with the store-made coffee in size, price and online promotions. The drinks made from the automated machine adopt the same standard of 16oz cup size. In addition, the company is synchronously launching the "first cup free, buy 2 get 1 free" and other promotional activities.
Luckin coffee EXPRESS's sister brand luckin pop MINI, when compared with other 200,000 vending machines across China, is quite competitive in terms of price, Qian explained. By working closely with global suppliers, the company has achieved significant economies of scale through large volume procurement. The cost saved will directly feed into luckin pop MINI terminals, enabling customers to enjoy prices comparable to e-commerce channels.
Qian believes that 70% of customers value coffee itself more than the environment. A good cup of coffee, a cost-effective price and the great convenience provided by the machine will better serve locations such as office buildings, campuses, airports, bus terminals, gas stations, highway service stations and residential communities, supplementing Luckin's current store network.
Though Luckin is being questioned over its fast expansion while bearing heavy losses, the company is living up to its name as a tech-driven company. Both Luckin stores and vending machines are fully integrated with the system empowered by IoT, big data, facial recognition, and other advanced technologies, creating 'omni-channel' networks with great efficiency, low cost and better customer experiences.
In China, the familiar vending machine is no longer an appealing story to investors. A capital fever two years ago brought dozens of brands onto the street and then saw many of them vanish due to operation conundrums. Luckin Coffee, on the other hand, is taking a different path while using the same tools. The company's smart retail platform has been building based on data collection from its stores (though it has been criticized for this). Going forward, Luckin's vending machines and users will act in synergy to assist the brand expansion more effectively than attempting to profit from isolated vending machines.